U.S. House Prices Rise at Fastest Pace in Close to a Decade

Strong demand and a chronic lack of homes coming to market continue to push up prices

Existing-home sales sprang ahead in May to their highest pace since before the financial crisis struck on the back of the growing imbalance between supply and demand.

According to the National Association of Realtors (NAR), existing-home sales rose by 1.8% between April and May to a seasonally adjusted annual rate of 5.53 million. All major regions except for the Midwest saw strong sales increases last month.

As a result, the number of homes changing hands in May was 4.5% higher than a year earlier, the fastest pace of annual growth since 2007, as supply fell almost 6% compared with May 2015.

The median existing-home price for all housing types in May was $239,700, up 4.7% from a year earlier. May’s price increase marks the 51st consecutive month of year-over-year gains.

“This spring’s sustained period of ultra-low mortgage rates has certainly been a worthy incentive to buy a home, but the primary driver in the increase in sales is more homeowners realizing the equity they’ve accumulated in recent years and finally deciding to trade-up or downsize,” Lawrence Yun, chief economist at the NAR , said.

“With first-time buyers still struggling to enter the market, repeat buyers using the proceeds from the sale of their previous home as their down payment are making up the bulk of home purchases right now,” he said.

All-cash sales made up 22% of sales in May, down from 24% in both April and a year ago. Individual investors, who account for many cash sales, purchased 13% of homes in May, unchanged from April and down from 14% a year ago.